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  • Question 1 600words 20 Marks To what extent (if at all) do international business transactions systematically differ from entirely domestic business transactions and how might a firm pro-actively and optimally manage or even exploit any such differe

Question 1 600words 20 Marks To what extent (if at all) do international business transactions systematically differ from entirely domestic business transactions and how might a firm pro-actively and optimally manage or even exploit any such differe Essay Example

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[Customer’s Name]

Presented to the

Committee on Degrees in [Your department]

in Partial Fulfillment of the

Requirements for the Degree of Bachelor of [Your course]

January 15, 2010.

Question 1

International business transactions and domestic business transactions

The term international business transactions refer to the ability of different countries to engage in trade relations regardless of their geographical locations. This is arguably as a result of progress in information technology that paves way for globalization. In light of this, investors are able to engage in business activities across diverse countries. For example, Nigeria trades it films outside its territorial boundaries thus widening their client base. According to Lessambo (2009:1) international business transactions foster world economy. International business transactions are practiced by large multinational companies that have a diverse supply chain. They include companies such as Coca Cola Beverages Company.

On the other hand, domestic business transactions (Mises 2009:429) refer to the business activities that are undertaken within a local level implying that a company operates within the boundaries of one country. This is evident in small and medium enterprises that have less capital to venture into international markets.

Differences between International and domestic business transactions


First and foremost, the primary distinguishing characteristic in international and domestic business transactions is the types of currencies used. International business transactions use various currencies depending on the country where the transaction is taking place thus resulting in foreign exchange. For example, a Japanese national transacting business in the United States of America exchanges the Yen with the dollar in efforts to ease the transactions. On the contrary, domestic business transactions largely depend on one currency that is predominantly used in the country. Business transactions within the United States use the dollar as the primary currency in transacting their businesses. According to McDonald, Burton and Dowling (2002:36) the use of national currencies negates the importance of foreign exchange thus greatly injuring the foreign exchange market. However, with the currency market fluctuations, international business transactions are affected unlike local or domestic business transactions portraying international trade as a risky affair.

“The relative value of national currencies, the exchange rate, constantly changes over time. This gives rise to payments and receivable risks international transactions” (McDonald, Burton, and Dowling 2002:36).


Policies refer to the set out guidelines that regulate the business environment in any given country. In this regard, international business transactions are different from domestic ones since they are regulated by numerous policies that may at time be unhealthy. On the other hand, domestic business transactions are regulated by only limited national policies within their business jurisdiction. For instance, several countries across the world have put out employment targets, taxes and growth rates (Aswathappa, 2010). In light of this, international business transactions might be injured by numerous taxes as they propel their wings to further business prospects.

Operational costs

Operational costs are the various expenses that a business entity encounters in its operations. International business transactions have higher operational costs vis-à-vis domestic business transactions. For example, a financial institution operating in many countries across the world is set to have high costs of operations through the employment of numerous staffs in deep contradiction to domestic business transactions that involve a low percentage of employees.

Question 2:

Islamic banking in Pakistan

Established in 2003, Islamic banking system in Pakistan is taking shape in the Muslim dominated country. Hassan and Lewis (2007:110) acknowledges that Islamic banking forms a new dimension of banking with over six fully fledged Islamic banks across the country. The banks aim at formulating policies that are in line with the Islamic practices without jeopardizing the economic growth of the country.

Banking practices

Islamic banks across Pakistan arguably result to the articulation of banking regulations within a framework that does not demean Islamic law. In light of this, banks (Hussain 2004:184) are prohibited under Islamic law to economically stimulate businesses such as breweries, piggery or casinos. This is because; the Islamic law prohibits its adherents against the consumption of pig related products since it’s deemed a demonic creature.

Moreover, Islamic law does not permit the hoarding of money in banks without necessarily making it productive. In light of this, it’s meant for meaningful circulation that arguably helps in general economic productivity. Hussain (2004:184) further asserts that the lending and banking practices carried out by Islamic banks go hand in hand with set out Islamic law and practices without making the overall economy vulnerable.

Additionally, the Muslim religion progresses in the realization of corporate social responsibility through putting into consideration zakat, a financial contribution to the underprivileged. This generally uplifts the wellbeing of the low economic situation and also plays within the lines of Islamic laws.

Unlike other conventional banks, Islamic banks do not charge interests in loans since it’s viewed as a straight violation of the Islamic law (Zubair and Abbas 1987:9). In this regard, Islamic banks contribute to the growth of the economy by attracting considerable number of individuals. For example, as a result of this, many people close accounts with other banks and subsequently open with Islamic banks. This generates confidence within the investors and thus propels personal and general economic growth.

Ijara connotes a transaction whereby financial institutions mainly Islamic give out financial help in a rental basis. For example, payments of wages to employees for a month long work done or renting of an asset. The term has proliferated the Islamic banking industry although in this regard, it’s known as leasing. This enables to effectively use a product and return it back after completion of service. In light of this, product innovations also significantly characterize Islamic banking. This includes Ijara, a financial type of leasing product.

Types of Ijara

Islamic related banks foster the provision of assets that they lease out to individuals thus acting as instruments of financing then recall their assets after an agreed upon date. This is mostly in relation to construction of homes. Islamic banks buy already constructed homes from other property investors and then lease them to their clients for monetary gains. In response, they generate considerable amount of income that they use for the development of the banks such as the opening of other satellite branches across the country. Ijara perpetuates economic growth through the payment of rentals. Moreover, the financial institution is at liberty to either sell or lease out the commodity to a new individual should they deem it fit. However, the leasing of products is relies on the marketability of the said instruments. Other products that are leased include agricultural machinery, aircrafts and industrial equipments among others.

Question 3:

International Business Transactions and the law (Australia and Singapore)

International business transactions, as discussed at the beginning of this paper delve into a number of national geographies each with its own legal parameters regulating its business environment. In light of this, there is not a single set out legal regulation limiting international business transactions. However, international business transactions popularly known as IBTs are regulated with myriad conventions that apply globally. According to Schaffer, Agusti, and Earle (2009:47) international business transactions are heavily dependent on international law which comprises of legal parameters that are set up to regulate transactions and relations within nations.

Latimer (2010:64) acknowledges that international business transactions are regulated through the formation of international business regulation bodies such as the commonwealth and the European Union. In countries such as Australia and Singapore, the regulating bodies ensure that they put into place limiting legal frameworks so as to avert business exploitations. This is heavily on imports and exports between the two countries.

However, international business transactions are regulated by the rule of law that includes the application of business ethics in the application of business transactions in a global perspective (Ronald A. 2000).

In light of the ever present temptation of even legitimately elected governments to misuse power, an educated citizenry holds firm to the belief that only a regime of laws, not rulers, can provide for the effective, secure and full exercise of its civil and political rights.

Furthermore, the rule of law serves as a critical ingredient in the realization of international business ideology in transactions. This is because businesses operating beyond local boundaries seek the services of a lawyer who critically advises them about the successful running of multinational businesses and also represent them in legal battles. On the other hand, nation-states have arguably come up with various mitigating legal boundaries regulating international business transactions. This is dealt with at the political legislative levels whereby countries legislative bodies form limiting laws mostly in regards to taxes. For example, particular finance ministers can zero rate exports and induce heavy taxation on imports in a bid to popularize internal/local markets. Moreover, legal regulation of international business transactions may be examined within three different legal contexts: private, national, and international law. Private law (Latimer (2010:78) regulates the business relations between parties according to their freedom to contract. Thus, in the arena of private law, one is concerned with such matters as enforcement of contracts, formation and conduct of businesses, resolution of private disputes, and related matters. Under the Western legal systems, parties to a transaction have considerable discretion in negotiating the private contractual rules that govern their business relationship. National public law regulates the outer limits of private conduct in the business world mostly internationally driven business transactions.

In addition, international law created through treaties and agreements between governments regulates the trade relations between nations and has an impact on IBTs.

In an effort to distinguish domestic and international business transactions, engaging in international business transactions is essentially a risky affair owing to the numerous legal barriers that limit its success. However, with no single law regulating international business transactions, it’s only vital for nation states to seek admission to trade blocs such as the European Union that serve to harmonize business transactions within and beyond member states. In conclusion, the collective participation of the social, political and economic sectors will effectively deal with international and domestic business transactions transgression.

Question 4

My advise on Indian and Singaporean trading firms on key legal aspects of contracts for the sale and purchase of manufactured goods between Janapada and Bedok — Indian and Singaporean firms respectively

  1. choice of law issues;

The choice of law for the Indian and Singapore trading firms on the key legal aspects of contracts for the sale and purchase of manufactured goods between the two countries is of great importance. Janapada and Bedok are two firms based in India and Singapore respectively. For the two firms to enter into any international business transaction, they must understand well the law of international business transaction which is the private law that usually determines the rights and the responsibilities of any parties that engage in any business transaction. The law of international contacts is one such example that governs the sale of goods and services. The two firms should enter into an agreement which should be governed by the international trade law which determines the responsibilities that two different nations have in regard to the charges that they should pose on duty for the imported goods (Schaffer et. al: 258).

  1. the merits of a compulsory arbitration clause;

There are several advantages in the use of arbitration clauses in the international business involving Janapada and Bedok firms. Arbitration often provides a neutral forum for any dispute. An effective arbitration clause should select a place of arbitration outside the government’s territory. Janapada and Bedok place of arbitration will determine the jurisdiction that may set aside the arbitral award. Arbitration facilitates enforcement. Even though both foreign forms can be sued in their respective countries, it may not have assets within this jurisdiction. Enforcement against assets in third countries is a necessity.

In addition to that, arbitration is very important as it helps to control any disruptive tactics. Although both firms Janapada and Bedok may have incentives to delay any legal disputes, state entities may be less likely to engage in cost-benefit constraints in making these decisions. Therefore, arbitration provides control in any disruptive tactics. In addition, arbitration helps in ensuring that the merits are heard promptly. In the case of Global versus ITC, although Global and ITC were related companies, the case provides lessons about the importance of independent, objective and good faith two-party contracting. Arbitration clause could have been used instead of using their respective counties jurisdiction.

  1. The merits of arbitration in India versus Singapore

In the recent times, India has observed rapid globalization of the economy and this has relatively resulted in increase in commercial disputes (Krishna et. al 2009). The increased number of cases that make the courts to be overburdened has led to the resolution mechanism of arbitration as an alternative means of dispute resolution. This has benefited business operating in India as well as those operating international business. According to Krishna et. al 2009, arbitration in India is still evolving. The goals of achieving the cheap and quick resolution in disputes resolution are far to be reached.

According to siac, (2010), Singapore has embraced arbitration in most of its business transactions disputes. This has been clearly elaborated by the fact that it established the Singapore International Arbitration Centre, in 1991 where by they offer neutral, efficient and reliable dispute resolution service in Asia. This has helped Asia’s legal and business activity greatly.

(d) The comparative difficulty of enforcing a “foreign” court judgment/arbitration award in their two countries (i.e. a Singaporean judgment/arbitration award in India and vice versa).

It is true that over the past decade, India has become an emerging economic power. This has been attributed to its favorable power policy and coupled with a stronger economy. This has enabled it to become popular as a foreign investment market. Arbitration has been embraced in India as a means of settling business disputes with foreign parties. However there have been difficulties in enforcing the awards or judgments of such cases (Gary Born, 2010:57).

If an award was made in a country which is officially recognized by India, the enforcement of such award is not entirely guaranteed. For instance, in the case of Venture Global Engineering v Satyam Computer Services Ltd (2008) 4 SCC 190, the Indian supreme court adopted the general view that the foreign arbitral award could be set aside for contravention of public policy. The reason for this was given that the award was inconsistence with Indian domestic law.

According to indiankanoon, 2003, Indian courts interpretation of what constitutes a contravention of public policy is very broad. According to the Oil & National Gas Corporation Ltd v Saw Pipes (2003) 5 SCC 705, the courts specified that the public policy of India is affected where the award is against the fundamental policy of the country. Relatively, it added that where the award is unjust, immoral or patently illegal, the broadness of this definition will only be limited by the imagination of the person interpreting it.

In the case of ITC Global Holdings Pte Ltd (In liquidation) v ITC Ltd and others [2011] SGHC 150, there was difficulties in enforcing arbitration for the case due to the different laws in India and Singapore (Lee Seiu, 2011). Most of the witnesses for the case were located in India and could not be compelled to appear before a Singapore court because the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters did not apply between Singapore and India.

Question 5

  1. The account of the two adverse transactions – “Trade Advances” and “Colombo Rice Transactions” (CRTs)

Global gave loans or advances to the Chitalia group which was one of its trading partners. These advances to chatalia totaled to US$9.1m which never had any commercial benefit to Global. Global alleged that the defendants, Chitalia Group were liable for its losses through “Trade Advances” and “Colombo Rice Transactions”. The trade advances were made for the benefit of ITC as they had sold some commodities at inflated prices to the Chitalia group which consequently resold them to other parties at relatively lower prices. ITC generated paper profits while Chitalia group made paper losses.

On the other hand, Colombo Rice transactions involved Global and ITC in 1994 where by ITC directed Global to purchase from chatalia some 34,000 metric tons of rice in Colombo. This particular rice was initially bought by Chatalia from ITC in 1993. In this scenario, Global alleged that it never derived any substantial benefit from purchasing this rice and that ITC had made an agreement that it will indemnify Global in regards to any losses it underwent due to this particular purchase.

Global made a claim that in total it suffered losses amounting to US$9M as a result of Colombo Rice Transactions. This was due to the resale of the rice to the third parties and the consequent impact of not being able to trade in other profitable commodities as it had committed its resources to the transactions. These two adverse transactions namely “Trade Advances” and “Colombo Rice Transactions” (CRTs) lead to Global’s liquidation(Lee Seiu, 2011).

  1. The material facts and relevant legal rules in the case concerning the issue of whether Singapore was the forum conveniens

The sole purpose of the forum conveniens analysis is to select the most suitable forum to hear the substantive dispute (Ronald A., Scott R. 2007). The main important factors to be considered in the analysis are the parties’ and witnesses’ personal connections. In addition to that , connections to the relevant events and transactions and the governing law of the claims are highly considered. In this scenario, Singapore facts and relevant legal rules in the case concerning the issue of whether it was the forum conveniens was that even though Global was incorporated in Singapore and that its liquidation was in Singapore, ITC and most of the other defendants were Indians nationals and resided there (Lee Seiu, 2011). So India was the most convenient forum due to the fact that the key witnesses came from there.

There are several factors that tipped the overall balance in favor of Singapore as the more appropriate forum in the judge’s opinion. First the two adverse transactions, Trade Advances and the Colombo Rice Transactions that were made by Global favored Singapore as the most suitable forum (Lee Seiu , 2011). The claims that pertained to the Colombo Rice transactions were better dealt with by the Singapore court. The wrongful acts in the transactions were committed in Singapore. So this made the governing law of the indemnity agreement that global asserted existed was Singapore law. In addition to that, Global’s allegations that Deveshwar and Vaidyanath were ‘shadow directors’ of Global and had consequently breached their duties under the Companies Act required consideration of Singapore law. This was particularly in the interpretation of the “shadow director” under the Companies Act. Singapore was better placed to determine this issue (Lee Seiu, 2011).

  1. Did Indian, Singapore law or a combination of both, govern the issue of (ir)regular service of the writ on the various defendants?

According to Schaffer, Agusti, and Earle (2009),for service of writ to be effected properly out of jurisdiction, the method of service must strictly comply with the foreign jurisdiction’s rules and laws regarding writ service. In addition to that, the court may not make any order which shall authorize the doing of anything in which service is affected. This is in accordance to being in contrary to the law of that country.

In my opinion, the combination of both Indian and Singapore law governed the issue of writ to the various defendants. Though there was an argument that the writ had become stale and invalid, the validity of the writ was a matter of Singapore law. On the issue of whether the manner in which the Writ was served to the three defendants is in compliance with Indian law is stipulated well. Under the Indian law, any defendant who is a natural person must be served either personally or by agent who is empowered to accept service on behalf of the defendant.

  1. What legal rules did the judge apply in determining whether or not the Singapore High Court could/should validate or cure any irregularities in the service of the writ documents on the defendants?

According to Assistant Registrar (AR), the irregularity of service on Deveshwar and Vaidyanath could not be effectively cured as any attempt to cure the irregularity lied with the Indian authorities (Lee Seiu, 2011). There are several legal rules that the judge applied in determining whether or not the Singapore High Court could validate or cure any irregularities in the service of writ documents to the defendants.

According to the high court decision which supported the AR on the cure, the plaintiff had obtained the leave to issue a writ against the defendant and consequently served a writ on the defendant at an address in Malaysia. The process of writ service was a nullity but not an irregular. This was because the notice of the writ was served on the defendant personally by a process server under the Malaysian firm of solicitors (Lee Seiu, 2011).

Secondly, a writ is no longer in the form of a command to the defendant in its present form. It’s however a mere notification to the defendant explains that an action has been commenced against him/her in court than a command to him/her issued by the court.

Any rules that govern service out of jurisdiction have often been considered mandatory in the context of the court’s assertion of extra-territorial jurisdiction. However the validation of a breach of requirements must depend on the case circumstances. It’s therefore not impossible to persuade the court to cure any irregularity in an attempted service out of jurisdiction in any deserving cases.

List of References

Aswathappa, (2010)International Business 4E, New Delhi,Tata McGraw-Hill Education

Gary Born, (2010) International arbitration and forum selection agreements: drafting

and enforcing Netherlands, Kluwer Law International.

Hassan, K, and Lewis, M. (2007). Handbook of Islamic Banking, Cheltenham: Edward Elgar

Hussain, J. (2004). Islam its law and society, Sydney: Federation Press

Krishna S., Momota O., Angshuman K., DEVELOPMENT AND PRACTICE OF

ARBITRATION IN INDIA HAS IT EVOLVED AS AN EFFECTIVE LEGAL INSTITUTION? , retrieved from http://iis-db.stanford.edu/pubs/22693/No_103_Sarma_India_Arbitration_India_509.pdf

Latimer, S. (2010). Australian business law 2011, Australia: McPherson Group

Lee Seiu (2011), SINGAPORE LAW WATCH: ITC Global Holdings Pte Ltd

(In liquidation) v ITC Ltd and others [2011] SGHC 150 RETREIVED FROM, http://www.singaporelawwatch.sg/remweb/legal/ln2/rss/judgment/12609.html?utm_source=rss%20subscription&utm_medium=rss

Lessambo, F. (2009). Taxation of International Business Transactions, IN: iUniverse

McDonald, F, Burton, F, and Dowling, P. (2002). International Business, London: Thomson

Mises, L, V. (2009). Theory of Money and Credit, Alabama: Yale UP

Ronald A., Scott R. (2007) Forum non conveniens: history, global practice, and future under the

Hague Convention on Choice of Court Agreements, London, Oxford University Press

Ronald A. (2000) Fundamentals of international business transactions, Netherlands,

Kluwer Law International

Schaffer, R, Agusti, F, and Earle, B. (2009). International Business Law and Its Environment,

CA: Cengage

Siac, 2010 Arbitration in Singapore http://www.siac.org.sg/

Shah, 2003, Oil & Natural Gas Corporation Ltd vs Saw Pipes Ltd on 17 April, 2003,

retrieved from , http://www.indiankanoon.org/doc/919241/

 Zubair I., Abbas M., (1987), Islamic banking, International Monetary Fund